Production / Production Legal
If you have raised financing and are ready to commence the production process, now is the time to hire an attorney if you do not already have one. When I provide production legal, I do so from the commencement of pre-production through the completion of post. I negotiate and draft all the agreements required by the production during that time. In addition, I help the production company become a union signatory when necessary, secure the requisite insurance coverage, and provide a myriad of other services required by the production. I am on call throughout most of the production to remedy any situation that arises. Production legal is billed on a flat fee and sliding scale basis that is contingent on the production budget and services being provided.
“Pre-production” is the production phase during which you prepare for principal photography: the film is cast, the screenplay is rewritten, locations are scouted, crew is hired, insurance coverage is purchased, the production budget is finalized, you become a union signatory (if necessary), etc.
A “special purpose production company” is a corporation or LLC that is specifically established for a picture’s production. The special purpose production company is formed, even when you have an existing production company, because you want to keep the picture, and its revenues and potential liabilities, segregated from your other assets. All agreements entered into by you on behalf of the production will be between the special purpose production company and the third party. To avoid chain-of-title issues, you have to assign any agreements you entered into, prior to the formation of the special purpose production company, to the production company. Your production attorney will form the special purpose production company as part of her production legal services. I refer to the special purpose production company as “production company” going forward.
Union members may only work for companies that are signatories of their union. As such, you need to decide up front if you are going to hire Screen Actors Guild (“SAG”), directors Guild of America (“DGA”), and/or International Alliance of Theatrical Stage Employees (“IATSE) union members.
You may become a signatory of one union without becoming a signatory of the others. For example, you can become a SAG signatory and then hire SAG members, but not do the same with the DGA and WGA. Hiring union members is more expensive because the unions have a set minimum rate of pay for their members and additionally require pension and health contributions on top of the salary you pay each union member. You can hire actors, screenwriters and a director who are not members of any union and can proceed through production without a SAG, DGA or WGA issue. The same cannot be said for IATSE where it has jurisdiction, because they expect you to become a signatory of the union unless your production is in a “right to work” state. Do not think that you can fool a union or just shoot guerilla style. If you do not become a union signatory when you need to, bet on the union shutting down your production until you are compliant.
Give yourself at least six weeks to go through the signatory process with each union. If you are going to become a signatory, get the paperwork in when you start pre-production. Be sure that you budget appropriately for union hires, since you will have to pay the minimums required, pension and health on behalf of each union member, and may have to pay penalties and overtime.
You become a SAG Signatory by applying to be so. SAG has a Signatory Package for the following production types: Student Films (less than 35 minutes, under $35,000 budget, and produced by an enrolled student) Short Films (under 35 minutes and under $50,000 budget), Ultra Low Budget Films (less than $200,000 budget), Modified Low Budget Films (less than $625,000 budget), Low Budget Films (less than $2,500,000 budget), and Theatrical Films ($2,500,000 budget and above.27 In addition, SAG has Signatory Packages for New Media, Interactive, Commercials, and Industrial Films.
You must complete and submit SAG’s Preliminary Information Sheet, which provides SAG with information regarding your production, your production company, and the parties to contact. A SAG Business Representative will contact you within a few days and will send you information and documents that need to be completed and returned to SAG. The representative will send you a Theatrical Information Sheet, a Theatrical Distribution Checklist, SAG Agreement for Independent Producers of Theatrical Motion Pictures, SAG Pension and Health Adherence Letters, and the Television/Theatrical Production Checklist. You need to provide SAG with your pre-production cast list, screenplay, day out of days, the production company’s formation documents (Articles of Organization and Operating Agreement for LLC’s, articles of incorporation and bylaws for corporations) and the chain-of-title documents. “Chain-of-title” is the chain of documents that proves that you own the screenplay and the film, such as copyright registration of the screenplay (or proof of filing), Option/Purchase Agreement, Work-For-Hire Agreement(s) for the screenplay, Certificates of Authorship (part of Work-For-Hire Agreement(s), transfers of copyright, Distribution Agreements, Sales Agent Agreements, Pre-Sale Agreements.
SAG will likely require assurance from you to safeguard its members’ salaries and residuals. Note that SAG will not clear your production until you have completely satisfied it. SAG will require a security deposit prior to the commencement of principal photography: for actor’s salaries, which is usually equal to two weeks of each SAG performer’s payroll plus the applicable pension and health (“P&H”) contribution.
You will have to enter into the SAG Security Agreement wherein SAG takes a security interest in your picture on behalf of all monies you will ever owe the SAG members you hire, e.g., salaries, penalties, P&H contributions, residuals. Yes, this means that SAG has a perpetual ownership interest in your picture.
SAG may require that you enter into a Collections Agreement whereby all the gross monies earned by your picture go into an escrow account; this is SAG’s way of assuring that it gets its residuals up front before the production company, and the picture’s investors, receive their share of revenues. SAG will likely require a residuals reserve on behalf of future monies your production company may owe SAG from TV, DVD and video revenues. Ask SAG up front regarding the residuals reserve, so that you are not surprised after you commence production.
SAG will want your picture’s distributor to enter into a Distributors Assumption Agreement, which makes the distributors responsible for the payment of residuals. I have yet to meet a distributor outside of the studio system who is willing to enter SAG’s Distributors Assumption Agreement . SAG will require additional documents if your picture has creditors.
SAG will clear your picture once you have satisfied all of its requirements. You cannot commence principal photography until it does. Do not lie to the actors about your picture being cleared when it is not. Not only does this damage your reputation with the actors and their agents/managers, it puts your production in jeopardy of being shut down.
The DGA, WGA and IATSE all have a signatory process. Like I said, submit your paperwork at the commencement of principal photography. I help my clients become union signatory with the applicable unions, as part of my production legal services. Notwithstanding, your line producer or you can do it yourselves if you are on a tight budget.